Synopsis:
Steel stocks like NMDC, SAIL, JSW Steel, Tata Steel, and several other steel stocks traded higher today as China plans to cut steel production between 2025 and 2026 to tackle global overcapacity, which has kept prices under pressure.
Nifty Metal made a day high of 9,681.25, up by 3.14 percent from its previous day closing of 9,384.35 points. It gained 297.65 points on Wednesday’s trading session.
Tata Steel jumped by 6 percent, NMDC Steel by 10 percent, Hindalco Industries and JSW Steel by 3 percent, Jindal Steel and Steel Authority of India by 5.5 percent each, and several other metal stocks are also up.
But why did Steel Stocks record an upsurge today?
Indian metal producers are poised for some exciting gains ahead, thanks to a mix of global and local developments that could boost demand, pricing power, and overall profitability. Below are some of the reasons that might work in its favour.
China’s Steel Output Cuts a Big Positive for India
According to reports, China, the world’s largest steel producer, is planning to reduce steel production between 2025 and 2026 to tackle the issue of global overcapacity. China is the world’s largest producer of Steel.
It produced 594.5 MT (million tonnes) of steel between January and July 2025. This is 12.5x more than the USA’s total production, and 6.26x of India’s total production (second largest).
This is a significant win for India. With lower Chinese output, there will be less cheap steel flooding the Indian market, allowing domestic steelmakers to maintain stronger pricing power.
Brokerage CLSA anticipates that this will enhance spreads and profitability for Indian mills, adjusting their FY26-FY28 EBITDA estimates for metals and mining companies under their coverage by -4 percent to +8 percent. Among the various segments, CLSA continues to favor aluminum players, pointing to a tighter demand-supply balance.
US Dollar Weakness to Drive Higher Metal Demand
Recently, the US dollar has faced some pressure, as a DBS report pointed out that Donald Trump’s new appointments to the US Federal Reserve might further impact the currency. On top of that, the US labor market is showing signs of softening, and Fed Chair Jerome Powell has hinted at potential rate cuts during his speech at the Jackson Hole Economic Symposium.
A weaker dollar is good news for commodities like steel, aluminum, and copper, which are traded globally in dollars. When the dollar dips, international buyers can buy more metals at lower effective prices, which boosts global demand. For Indian metal producers, this means better export opportunities and the chance to command higher prices in the international market.
GST Reform Hopes Could Drive Demand
On the domestic front, the GST Council, chaired by Finance Minister Nirmala Sitharaman, is meeting on September 3-4 to discuss a proposal for a simplified two-rate GST structure of 5 percent and 18 percent.
This could reduce compliance costs, improve efficiency, and boost affordability across industries. For metals, a lower GST on construction materials could spur demand in the real estate and infrastructure sectors. Combined with cheaper financing expected from Fed rate cuts, this creates a strong demand outlook for capital-intensive industries like metals.
With the US dollar losing strength, China cutting back on steel production, and possible GST reforms on the way, the outlook is looking pretty bright for Indian metal producers. All these factors combined could lead to increased demand, stronger pricing power, and better profit margins for companies in this sector.
Written by Satyajeet Mukherjee
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